As you may know from reading this column, we at Birthing of Giants are big on leveraging technology to build scale. Small B2B service businesses can adopt new, unproven technologies more nimbly than larger companies, and turn around and sell services based on those technologies at a profit. Technology can be used to reduce your headcount, attract new customers and markets, and transform your business model.
Ariane Daguin, CEO of fine foods distributor D’Artagnan, has a unique twist to that narrative. Daguin and her then-partner launched D’Artagnan back in 1985 to distribute traditionally raised meat and poultry products to elite chefs in New York City. It was a moment of inflection for the American culinary scene. Since World War II, the U.S. has industrialized agriculture more than any other country. This doubled production, but at the cost of small, family-owned farms and traditional animal husbandry.
In the 1980s, a few Americans began contemplating what we left behind. So began the “farm-to-table” concept that is so popular today.
That was far from the case when Daguin first arrived in New York City from her native France. She was shocked at how mushy and tasteless the meat here was. “I’m from Gascony in southwest France, where everything is about food,” she explains. “We live to eat; we don’t eat to live.”
“Everything contributes to the taste of the meat,” she continues. If you give the animal crap food, you’ll get crap meat.” (It sounds nicer in her lovely French accent.) “You can call it innovative, and I’m very proud of what we do,” she says. “But really it’s nothing else but things that farmers who respect animal husbandry have been doing for centuries in my part of France.”
D’Artagnan’s products, sourced from small independent ranchers around the country, were a godsend to the elite chefs who purchased them. D’Artagnan’s value proposition: “Food raised right tastes better.”
It was a simple idea that was mind-bogglingly complex to execute. In a country where industrial-scale factory farming was the norm, Daguin had to ensure that each supplier was of the highest quality, raising heritage livestock without feedlots, pesticides, hormones, or unnecessary antibiotics. She had to organize her supply chain to accommodate peak demand for certain types of meat months in advance. And she had to find small-scale slaughterhouses to process the animals at exactly the right time: not only when they reach the right maturity, but also when a restaurateur has put it on the menu.
The result was a logistical game of musical chairs that started on Monday evenings when chefs would place their orders and concluded on Thursday mornings when D’Artagnan delivered its products. In between, Daguin would call a supplier, who would have the animal processed and the meat shipped to a warehouse and ready for distribution.
By the time Daguin brought on Andy Wertheim as president in 2006, the company was making $5 million per month. But the system was straining at the seams, leaving highly perishable products unsold in the warehouse. To better balance supply and demand, Wertheim, an experienced marketer and former COO, launched an e-commerce site to market flash-frozen cryo-packed cuts directly to consumers. An additional division sold to supermarkets.
At the time, e-commerce for fresh food was something of a novelty—especially with prices that reflected the high quality of D’Artagnan’s products—and it hardly made a dent in the company’s overall sales. After all, the market for $24 chickens and $70 Wagyu steaks is rarified at best. It also required an entirely different distribution model: third-party overnight drop shipment versus D’Artagnan’s growing fleet of trucks. The point of this e-commerce venture wasn’t to make more money but to move inventory more efficiently, and to that purpose, it worked perfectly. Still, by 2019, e-commerce accounted for just 10 percent of the company’s revenues.
That all changed in the early spring of 2020. COVID-19 set D’Artagnan’s business on its head just as it had with so many companies. On March 14, 2020, just a few weeks after the company celebrated its 30th anniversary with a lavish event for 2,000 guests, state governments issued stay-at-home orders, and restaurants across the country closed their doors. Overnight, 65 percent of D’Artagnan’s business evaporated.
Vowing not to lay anyone off or even cut salaries, Daguin set the pivot in motion. While D’Artagnan’s restaurant business tanked, e-commerce became the little engine that could. Everyone pitched in and learned how to adapt. Entire beef loins meant for restaurant kitchens were now being cut into portions that could be flash-frozen and sold to consumers. “In the warehouse, we were trying to reinvent the picking and packing jobs,” Daguin told Microsoft’s Connected & Ready podcast. “All of a sudden, instead of putting big cases in our own refrigerated trucks, we had to open the case, take pieces out one by one, and put them in an insulated box with dry ice for small consumer orders.
“We were living the company motto, ‘All for one, and one for all.’” To prime the demand pump, D’Artagnan increased its online marketing and got positive results. The company even started home delivery in the areas surrounding its warehouses to keep its drivers occupied and add value to the consumer business.
Forecasting and planning, difficult in the best of times, became a nightmare. Preparing for Thanksgiving 2020, for example, meant placing orders for as-yet-unborn turkeys in the spring. Would the pandemic be over by November? Would people be having large family gatherings as usual? Daguin’s instincts told her that yes, families would gather, but in fewer numbers that required smaller birds than usual. She ordered 21,000 turkeys—an optimistic bet considering that a 12 to 14-pound bird retails on D’Artagnan’s site for $84.
The bet paid off, and as 2020 drew to a close, D’Artagnan’s sales actually grew to $150 million, up from $132 million in 2019. More significantly, the company’s direct-to-consumer sales went from 10 percent of revenues to 25 percent. The result, Daguin explains, is a healthier company, less reliant on a single type of customer and able to shift resources from consumer to supermarket to restaurants as the market dictates.
With more than 30 years under its belt and $150 in revenues, D’Artagnan is hardly a startup. But its ability to reinvent itself while preserving its mission means it can still differentiate itself from competitors that enter the arena every year. It’s a fresh twist on the perfect business model, with technology boosting efficiency and total addressable market (TAM) at the same time.
Lewis Schiff runs the Birthing of Giants Fellowship Program, a one-week guided strategic planning process that’s attended by the owners of the fastest-growing companies in the world. He also runs Moonshots & Moneymakers: The Oxford Innovation Conference for American Entrepreneurs.
Want the inside scoop on how Ariane Daguin and other entrepreneurs built their companies from moneymakers to moonshots? Visit Birthing of Giant’s free monthly video series, How I Did It.